Macau gaming … casinos caught between a rock & a hard place

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There is definitely no place in Asia and even the world that is more glitzy, over-the-top & catering to every debaunchery that you can think of except in Macau.  Casinos raked in the money over the last few years especially when the gambling addicted mainland Chinese were unleashed onto the gaming tables like pent up addicts.  But of course a lot & how much of that money flow onto the gaming tables is anybody’s guess on the percentage which came from money laundering of ill-gotten gains in China. These sums were brought into Macau that is widely speculated through various means as discussed here http://www.businessinsider.com/how-people-use-macau-to-launder-money-2013-11?IR=T&.

SJM (800 HK), Galaxy (27 HK), Wynn Macau (27 HK), Melco (200 HK), Sands China (1928 HK) & MGM China (2282 HK) that are the listed gaming stocks of the casino operators soared in the last 2 years.  However, with the anti-corruption crackdown in China initiated with a renewed vigour since late 2013, the gaming stocks reached a top in January 2014 & have fallen about -26% since according to the chart above; showing the performance of a composite basket of gaming stocks.

With no let-up in China President Xi jinping drive to stamp out financial sleaze by punishing “tigers and flies” – corrupt officials at all levels of the ruling Communist party of China, prospects do not look bright still.  http://www.ft.com/intl/cms/s/0/0bf0de6c-d6a2-11e3-907c-00144feabdc0.html#axzz312j7F7nE.

Asianmacro is going short on Macau gaming stocks using the composite basket as reference at 67 to 70 level & targeting a further -30% drop to 46-50 level.

Let’s roll the dice indeed!

 

 

Who wants to be a trader millionaire ?

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The 2015 Lamborghini Huracan LP610-4 is supposed to be comfortable on the road & also superb for that weekend track day with the boys. Now how should I know given that I am not about to blow away $1 million on this toy.

From the canyon of Wall Street in Manhattan, to the City & Canary Wharf in London to Raffles Place (and now Marina Bay) in Singapore; successful traders in banks and funds go hand-in-hand with their fancy rides & loud exhaust notes!

Many unemployed chaps have been eyeing that lifestyle giving rise to the growing ranks of day-traders including those who signed up for many ‘get rich through trading’ courses thinking that it can magically transform anybody into the next market wizard http://www.bbc.co.uk/programmes/b01s8mnx.

Interestingly, even in the ranks of the real bank traders, those numbers are diminishing with impending job cuts if they have not been thinned by now with Barclays announcing another 15,000 job cuts after dismal results 2 days back http://www.bbc.com/news/business-27312798.

Asianmacro used to see quite a number of Ferraris & Lamborghini cars parked at One Raffles Quay at Marina Bay in Singapore whenever he was in town & visiting that area.  I have been seeing fewer of those cars the last time I went by & perhaps they are found here for sale now: http://www.sgcarmart.com/used_cars/listing.php?BRSR=0&MOD=Ferrari&RPG=20&VEH=8http://www.sgcarmart.com/used_cars/listing.php?MOD=Lamborghini&RPG=20&VEH=8

Not a good sign indeed when it runs to 4 pages of exotic cars for sale in each …

Biotechnology vs Internet vs Social Media … Who dares win !

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Sometimes it pays to take a step back from looking at the trees to see the forest. Indeed, most people will know of the explosion in Social Media & also the dizzy rise in the stocks of the lucky listed firms in this sector.  But few will be aware that Biotechnology sector stocks have even surpassed the explosive rally in both Social Media & Internet related stocks since beginning of 2012.

The above chart clearly illustrates what happened in the last two & a half years using IBB (Biotech ETF), FDN (Internet ETF) & SOCL (Social Media ETF).  Now, all 3 sector ETFs have suffered corrective move lower from March 2014 all time highs of around -16% for IBB, -19% for FDN & -28% for SOCL.  S&P500 (SPX) & Nasdaq100 (NDX) only suffered a -1.5% & -5% drop from March 2014 highs respectively.

Some commentators & analysts out there think that there are nuggets to be found in the Biotech carnage  http://www.forbes.com/sites/kenkam/2014/04/18/opportunities-among-the-rubble-of-the-biotech-selloff/ . However, Asianmacro think that unless you are very familiar with the precise potential new ‘wonder drug’ or ‘cure all treatment’ that is in the pipeline of some of these Biotech companies; more often than not, it is like prospectors trying to make it big in drilling for oil or finding the next new gold vein in the ground.  Who dares win!

However, Social Media might be more interesting now given the deeper correction & some of the names in the ETF & sector like Tencent, LinkedIn, Sina Corp/China & Google continue to deliver in their businesses & earnings. In fact, Asianmacro recommended a buy recently in Tencent on 6 May 2014 https://asianmacro.com/2014/05/06/where-to-on-social-media-facebook-10-cents-or-rakuten/ .

OK time to hit the ‘LIKE’ button or perhaps the ‘BUY’ button as well !

Long $/IDR … as Indonesia cuts its nose to spite the face besides elections uncertainty

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Asianmacro has touched briefly on shorting IDR together with NZD & Gold very recently on 6 May 2014 & they are already working well https://asianmacro.com/2014/05/06/sell-in-may-go-away-the-question-is-what/ .

Besides the Presidential elections uncertainty, concerns are mounting again on the Indonesian iron-ore exports ban unless they are processed in-country.  Seems like the country has cut its nose to spite the face & shot itself in its foot to me! http://www.ft.com/intl/cms/s/0/a0e7256c-c455-11e3-b2c3-00144feabdc0.html#axzz312j7F7nE .

Asianmacro sees that all the mis-steps with elections uncertainty will make long $/IDR a good risk-reward trade to add on even at current levels 11570 spot & as for the Non-Deliverable-Forwards *NDF (11600 1-month NDF & 11700 3-month NDF).

From above chart, we should see 12,000 & maybe even 12,500 soon in spot $/IDR retracing back to its recent highs earlier in the year before the Jokowi feel good effect started.

 

 

Seasonality trades in Hang Seng Index (HSI) & Dollar Index (DXY)

Years ago when Asianmacro was about to graduate from university, he did well at interviews (or perhaps sufficiently lucky enough) to secure a position with a top Wall Street investment bank as a trader even before graduation.  But thoughts of pursuing a PhD & even becoming a professor did cross my mind.  However, the thought of forever needing to prove that your thesis & research is ‘right’ empirically or scientifically is way too much use of whatever brain-cells that was left in me … so Wall Street here I come more than 20 years ago!

Unlike Strategists, Economists, Analysts & other spin-masters from investment banks’, brokerages or asset management firms that can usually throw tonnes of information & justifications on why you need to buy, sell or hold … whatever that they want you to believe in; Asianmacro does not want to nor need to.  It’s my money that I am risking & I can believe in the brevity of thought, analysis, decision & execution.  Detailed & overly myopic empirical or scientific proof reminiscent of what a professor or PhD candidate needs to do might more often than not cloud the view of the forest from the trees.

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Looking at the above heatmaps for Hang Seng Index (HSI) & the Dollar Index (DXY), you cannot help but notice that statistically speaking, HSI has fallen while DXY has risen in May over the last 10 years more often than not by a considerable margin.

Is it the ‘Sell in May & Go Away’ catalyst for risky assets at play … or is it something else? It’s really too much use of my brain-cells and perhaps just a sufficient bet in short HSI (which I did on the break of 22,000 for May14 futures) and DXY June14 futures now at 79.15 (from 79.20 to 78.90) that gives you participation if this seasonality happens again but without breaking the bank & your sleep if it does not.

India Elections: Modi muddles … NIFTY shudders … INR falters

Asianmacro loves trading & positioning in the Indian markets across FX, rates, equities & credits from time to time when special situations & catalysts comes about in this country.  As it has such a messy democratic process, coupled with unpredictable weather (*rainfalls & weather is such a big thing for such an agrarian society).  India also has a superstitious & chart crazy technical driven domestic market (*the Indians religiously follow candlesticks & all forms of chart studies including financial astrology) …  and it all comes to a boil every now & then!

The massive depreciation of INR from 52 against USD to about 70 in 2013 together with the appointment of the well respected Raghuram Govinda Rajan as the Reserve Bank of India (RBI) governor in September 2013 when $/INR was 70 marked the peak & turnaround of the FX pair.  Indian stock market, NIFTY rallied strongly since as well.

Presently, Asianmacro is worried about the impending return of El Nino http://www.livemint.com/Politics/JpJfZbdhAmV1qT3qWkVeoO/El-Nino-alert-issued-by-Australia-as-event-seen-developing.html  & also the Indian elections is really a muddling headache for India whichever way it goes, where Modi while serving well within India is not viewed favourably in the West, http://blogs.ft.com/beyond-brics/2014/05/05/india-elections-four-pitfalls-for-modi-and-the-bjp/

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From the chart above, it just make sense to me that unless there is really some good news coming out in weather or politics; having a short INR and short NIFTY position will be my favoured play to wear diamonds soon!

Demise of trading revenues in banks & in hedge funds

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Barclays announced earlier today a poor set of results mainly due to a 41% drop in revenues over at its FICC (Fixed Income Currencies & Commodities) business division. As reported here http://www.ft.com/intl/cms/s/0/f9dd1338-d4e6-11e3-adec-00144feabdc0.html#axzz30wtGgbfE & here http://www.ft.com/intl/cms/s/0/fe1c811c-d50a-11e3-9187-00144feabdc0.html#axzz30wtGgbfE in the Financial Times.

Hedge funds were not spared as April 2014 was reportedly the worst month for many (http://www.zerohedge.com/news/2014-05-05/cruelest-month-april-was-bloodbath-most-hedge-funds) in a long while especially for CTAs & Macro strategy funds that rely on heightened volatility & gyrations in market with trends to serve them well.  Even the legendary Paul Tudor Jones was lamenting last night at the Ira Sohn conference on the need for a ‘Central Bank Viagra’ to bring excitement back to the markets http://www.bloomberg.com/news/2014-05-05/-tudor-s-jones-said-macro-funds-need-central-bank-viagra-.html .

It is the recognition of such ‘dampened’ volatility and lack of trend breakouts or mis-pricings in the markets that saw Asianmacro laying low for a number of months.  From the chart above, where the upper panel white line is the JPM G7 FX vols minus VIX; has gone back close to zero since H2 2013 till present.  Typically VIX as a simple measure of S&P500 implied vols is usually much higher than FX vols especially during periods of financial market stress where equities tend to plunge faster & a lot more than FX directionality.  The bottom panel in the above chart is the normalised vol price of VIX & JPM G7 vols from 2006 before the pre-2008 crisis period till present. FX vols is in fact going back to almost the lows in 2007 just before the onset of the financial crisis.

Are we facing once again the calm before the storm? We could well be when the last crowded positions capitulate & it seems like the consensus strong USD & short US Treasuries trades of 2013 going into 2014 are being forced to unwound at great loss by banks & hedge funds …. we are getting close to the last inning.

 

Where to on Social Media … Facebook, Tencent or Rakuten ?

Before AsIanmacro takes his sip of this evening single malt whisky, time to snap a pic & share it on social media … Now wait, so should it be on Facebook, Whatsapp, Viber, WeChat, Instagram, …. the list goes on and it is definitely a chore these days on which to use!

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I have always been a techie & have pretty much every other social media app installed across my iOS, Android & Windows devices.  But when it comes to interacting with pretty much anybody in China, it’s Wechat (owned by Tencent – 700 HK)… forget about everything else.

Viber is just so sluggish eversince the recent updates & also the purchase by Rakuten (4755 JP) probably will turn it into another drive-by blasting of spam marketing everytime you use Viber in due course.  Facebook (FB US) even with its purchase of Whatsapp is just so yesterday … good for recording your life-story everywhere else except China & that Whatsapp .. come on, does not even have VOIP calling now & other features available in so many other messaging apps. From above normalised charts of FB US, 4755 JP & 700 HK; you can see FB & 4755 skyrocketed & outperformed 700, probably due to the wider investor base due to the listing in USA & Japan chasing them exuberantly.

This brings me to a ‘gun-to-head’ showdown, where despite the lofty valuations applied to FB US,, 4755 JP & 700 HK; if I need to own just one social media company to ‘pay-to-play’ & get on the boat … it will be 700 HK! From the chart below, look at the decent 25% correction from the recent highs & it has real revenues that continue to grow with monetisation of all the services and paid extras that people foot up in China to use. It’s a no brainer .. except at what levels to jump onto the bandwagon.

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For Asianmacro, it will be between 450-462 just shy of current 492 level.  It can easily come with any ‘Sell in May & go away!” portfolio adjustments soon in markets.  Stop loss sell will be < 425 not because I want to get out per se but purely from risk-management, but decent buying levels after will be 380-400 which I will be interested in getting back on again.

 

The Singapore Population Ponzi … Short SGD as funding FX

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Singapore has experienced the fastest rate of population growth anywhere in the world over the last 10 years.  However, if you go back in history to examine its rate of population growth and also literature on Total Factor Productivity, you will realise that there have been arguments from early 1990s levelled on the unsustainable and also myopic and unproductive utilisation of pure increase in labour as an input in Singapore to drive economic growth. http://www.nber.org/chapters/c10990.pdf

Asianmacro as a trader believes in the brevity of my musing & you can click on the above link to read in detail if you are interested in the paper by Prof. Alwyn Young from MIT published in 1992.  From the illustration above, we can see the close correlation between SGD appreciation and stock market (Straits Times Index – FSSTI) with Population growth % yoy.  It makes you wonder with the announced deliberate slowing down of the influx of foreigners by the Singapore government that drove this unprecedented pop in population, what will happen to SGD and FSSTI?

Anyway, the Monetary Authority of Singapore (MAS) recently concluded its semi-annual policy meeting in April 2014 without much fanfare http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statements/2014/Monetary-Policy-Statement-14-Apr-14.aspx .  For the longest time since 2008, SGD has unfailingly appreciated into and after each and every MAS policy meeting as a strong SGD policy (which is also the only policy tool MAS has that it uses) is trumped out time and again.  However, such an antiquated policy is long past its use-by date and it has been a case of weak USD against all major currencies in recent months rather than a strong SGD that resulted in $/SGD at 1.25 today.

Asianmacro will be very keen to established short SGD against GBP, AUD and EUR (*actually Asianmacro already have these positions for awhile and will add to them) on any potential SGD appreciation in May/summer if some mistaken belief by portfolio flows in SGD as a safe haven results in inflows over May/summer driving $/SGD to 1.2350-1.2450 levels.